Conservation Is Not Always the Best Option

The Oregon Public Utility Commission (PUC) is considering a request by the Energy Trust of Oregon (ETO) to allow the Trust to spend ratepayer dollars on certain energy efficiency measures that don’t pencil out. The Oregonian has correctly noted that if the estimated benefits of such projects are less than costs, we should stop spending ratepayer dollars on the subsidies.

Several recent op-ed writers have taken The Oregonian to task on this because the local mantra of environmental advocates has long been that conservation is always better than building a new power plant. In a world of high natural resource prices, this is likely true; as a region we have saved a lot of energy through conservation over the past 30 years.

But we are in a new boom period for American energy production, across multiple fronts, including natural gas, coal, oil, and propane. With a glut of natural gas, domestic prices have dropped, leading to negative results for the benefit-cost tests applied to some conservation projects. Yet, advocates who were happy to trumpet the virtues of “cost-effective” investments all those years now resent the fact that the math no longer works in their favor. Therefore, they’d like to change the rules.

Proponents have made a lot of arguments for continued public subsidies: the ETO should be allowed to offer a “core program” of insulation measures for natural gas homes that are exempt from cost-effective determinations; there are “non-energy” benefits from conservation, such as more comfortable buildings; and natural gas prices might rise again, so we should keep all these contractors working to install stuff even if it doesn’t make financial sense today.

But the law that created the Energy Trust was clear that ratepayer funds collected through the three percent monthly tax on ratepayers (otherwise known on your monthly utility bill as the “Public Purpose Charge”) could only be spent on “cost-effective” measures. It’s bad enough that the PUC has been letting ETO operate with a waiver from this requirement for the past two years; there is no justification for another extension.

The PUC staff recently made draft recommendations to the Commission that will disallow those measures with the worst benefit-cost numbers, but continue allowing many that are close to positive, but still losers. The PUC should take the guesswork out by simply complying with the law. Ratepayer funds should only be spent on conservation measures where estimated benefits exceed costs.

John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free market public policy research organization. This article originally appeared in the Oregonian on September 21, 2014.

The PUC Is Right: Some Conservation Projects No Longer Make Sense

The Energy Trust of Oregon (ETO) is a nonprofit organization funded by taxes imposed on utility ratepayers. Most of the tax money is spent on subsidies for energy conservation programs.

While energy efficiency is a good idea, not all projects pencil out. State law requires that specific measures, such as installing additional attic insulation, be “cost-effective.” That means that installing the measure makes more financial sense over the long term than having the utility simply provide more energy. Projects that are too costly are disallowed.

Now that the country is experiencing a glut of natural gas, many conservation measures no longer meet the legal requirement; but the Energy Trust wants an exception in order to continue funding its energy efficiency programs. Proponents argue that energy conservation is always cheaper in the long run than building a new power plant, but clearly this is not the case. According to the Energy Trust itself, some of their efficiency measures only return two dollars of benefits for every five dollars spent.

The staff of the Public Utilities Commission is recommending that some conservation measures preferred by the Trust be disallowed in order to protect ratepayers from excess taxation. This is the proper recommendation to make, and the Commission should support it.

When natural gas prices are low, ratepayers should be rewarded, not punished by continued taxation for projects that no longer make sense.

Energy-Efficiency Myths of Commuter Rail

Advocates of rail transit tend to argue that we need trains because they are more energy-efficient than buses or cars. Unfortunately, that’s only true in some cases.

According to a new report by the Federal Railroad Administration, the average energy consumed by all commuter rail systems in America during 2011 was 2,923 British Thermal Units (BTUs) per passenger-mile. But the commuter line operated by TriMet (WES) was close to the bottom: WES consumed 5,961 BTU per passenger-mile, more than twice the national average.

Not only is WES inefficient compared with its peer group, but it is wasteful compared with other modes of travel. The national average for all transit buses was 4,240 BTU per passenger-mile; for all light-duty cars, the average was 3,364.

Based on these numbers, the environment would be better off if WES were terminated and riders simply got in their cars.

Nonetheless, TriMet management is “all-in” on more commuter rail. In its proposed FY 15 budget, the agency plans to purchase two additional rail vehicles at a total cost of $8.5 million. None of those costs will be paid by the privileged few who ride WES; debt service will be paid by taxpayers for the next 20 years.

It’s a cliché but still true: In government, nothing succeeds like failure.

John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free market public policy research organization.

Worried About Climate Change? Promote Free Markets!

Todd Wynn
Cascade Commentary

Worried About Climate Change? Promote Free Markets!

by Todd Wynn

Every day more and more Americans are growing skeptical of the climate change doomsday claims and plans to ration energy through cap-and-trade type proposals. Despite this, many environmentalists still claim that far-reaching government intervention is needed to achieve greater energy efficiency and lower greenhouse gas emissions to reduce the threat of global warming. Although there has been no statistically significant global warming since at least 1995, the same groups often claim economic growth and lack of comprehensive environmental regulations have created a society that wastes energy and pays no regard to greenhouse gas emissions. But what if less energy use and lower greenhouse gas emissions are a byproduct of limited government and economic freedom? What if environmentalists’ goals can be reached by freer markets and prosperity? Recent Cascade Policy Institute research shows that very phenomenon.

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NEW REPORT – Economic Freedom: A No Regrets Strategy for Reducing Global Energy Consumption

Todd Wynn
Economic Freedom: A No Regrets Strategy for Reducing Global Energy Consumption

A new report from Todd Wynn of Cascade Policy Institute

Summary:

This empirical study exposes a relationship between greenhouse gas intensity, energy intensity and economic freedom. The level of a country’s economic freedom is a statistically significant and negative determinant of both energy intensity and greenhouse gas intensity. Countries with higher levels of economic freedom not only have more energy efficient and less carbon intensive economies, but over time these countries continue to decrease the amount of energy used and the amount of carbon dioxide emitted per unit of production. The merits of free markets and economic prosperity should not be overlooked as a potential method for reducing carbon emissions.

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Todd talks about the report: